Calian’s $1B deal: Ottawa firm secures 12-year health-care contract

If Calian employees needed any more reason to celebrate during the firm’s fiscal year-end party last Friday night at the Hilton Lac-Leamy, CEO Kevin Ford provided it in spades.

At 3 p.m. that afternoon, Mr. Ford received the news he’d been anxiously awaiting for weeks – Calian’s 12-year contract to provide health-care support services to the Canadian military had just been renewed. And as a bit of a TGIF bonus, the firm also found out it had received two additional contracts to supply similar services to the RCMP and Veterans Affairs Canada.

The expected total value of the deals: $990 million, including $875 million for the armed forces contract, plus an additional $60 million for the RCMP pact and $55 million for the Veteran Affairs deal.

“There was tears, elation, joy,” Mr. Ford told OBJ Monday when asked to describe his employees’ reaction to the new deals on Friday night.

“This contract has been a big part of what we do for the last 12 years. You never take it for granted that you’re going to re-win these things. You couldn’t have scripted it any better.”

By Monday afternoon, it appeared the markets agreed. Shares in Calian (TSX:CGY) had jumped nearly 14 per cent to $32.55 in late-afternoon trading on the Toronto Stock Exchange.

“From a financial lens, as a small-cap company, a 12-year contract with a value up to $1 billion is very significant,” Mr. Ford said. “It provides a solid foundation to continue to grow the company.”

The new contracts are expected to kick in once Calian’s current 12-year pact with the Canadian Armed Forces expires on April 1, 2018. The deals have an initial term of four years, with options for an additional eight years.

Calian’s current deal with the armed forces generates between $65 million and $70 million in annual revenues. The company said the latest contracts have the potential to be even more lucrative, but the exact services the firm will provide to the RCMP and Veterans Affairs have yet to be determined.

Asked if the additional work will mean more hiring at Calian, which now employs 2,800 people, Mr. Ford said it’s too early to say.

“We have no idea of the scope of the demand and how much more horsepower we’re going to have to add in,” he said. “I definitely think there’s upside for jobs … but I think we have to wait and see how this plays out before I can commit to any numbers.”

Calian supplies a range of health-care services to armed forces personnel across the country, filling short-term positions at military bases, providing medical care in remote regions and offering access to specialists who are in high demand. The company will now provide similar services to the RCMP and Veterans Affairs.

As part of the new contracts, Calian will partner with fellow health-care provider Bayshore, which operates a total of more than 100 home-care facilities, pharmacies and physiotherapy clinics across Canada.

“We’re really excited about working with them,” Mr. Ford said. “They’re a key partner for us on this deal.”

He also said the Ottawa-based firm, which has acquired five companies since he joined the executive team seven years ago, isn’t done expanding its base of customers and services.

“We’re going to continue to look for other opportunities, whether organically or through acquisitions, to continue to grow our health-care footprint for sure. This is definitely a piece of the puzzle, but there’s still lots of things to get done.”

In its last earnings report in mid-August, Calian reported third-quarter revenues of $67.3 million, a decline of eight per cent year-over-year. At the time, Mr. Ford attributed the drop to a “gap in the wind-down and ramp-up” of major projects.